Lilly Shareholders Reject Options Plan

Published
8:00 pm EDT, Sunday, April 27, 2003

Eli Lilly and Co. shareholders on Monday rejected a pension fund's proposal to count stock options as an expense against earnings _ a move supporters contend would provide a more accurate picture of the drug maker's finances.

A growing number of companies, notably General Electric and Coca-Cola, are making the change this year in response to the corporate reform movement.

Lilly's board of directors opposed the advisory proposal considered at the company's annual meeting. It failed to gain a majority among holders of 974 million shares for which ballots were cast.

Sidney Taurel, Lilly's chairman, president and chief executive, said the board that sets U.S. accounting standards last month voted unanimously to draft new rules requiring companies to consider employee stock options as an expense. But it is expected to be another year before the new rules are adopted.

"We believe it makes sense to wait until the standards board establishes new rules that can be consistently applied by all companies," Taurel said.

The proposal at Lilly's meeting was presented by the Massachusetts Carpenters Pension & Annuity Funds, a Lilly investor group. Last week, shareholders of Apple Computer and Delta Air Lines adopted similar proposals, which are not binding on the companies' boards.

Shares closed at $64.04 Monday on the New York Stock Exchange, up 76 cents.